Mall Owners Struggle to Reverse Declines

By

Emily Glazer

July 3, 2011

Shopping malls, once a hub of suburban commercial life, are rapidly losing ground to online shopping and off-mall locations. The empty storefronts make malls less appealing for consumers and create a ripple effect, says Philip Martin, a real-estate investment trust strategist for Morningstar. Many large retailers are also downsizing to smaller locations, now that they don't need such large display floors or inventory space. Where is the growth?

Food: In the interest of keeping shoppers in the building, some malls are renovating their food courts to bring in more local eateries, while others are opening new wings dedicated to high-end restaurants. Department stores are also dedicating more square footage to food by adding and expanding restaurants. Shoppers spend almost 20% more at a mall with a "good food court," according to a 2007 survey cited by Arun Sharma, a marketing professor for the University of Miami School of Business Administration.

ENLARGE

Entertainment: As malls turn to celebrity appearances, on-site health screenings, fashion shows and more, the Simon Property Group,SPG0.58% the biggest mall developer in the U.S., has added the 18-year-old DisneyDIS-0.02% star and singer Selena Gomez to its roster for a series of question-and-answer sessions. The result: an audience of 3,000 to 6,000 people per event, says Simon spokesman Les Morris.

Gift Cards: Customers are often wooed by mall-wide gift cards, where one card could get you a kitchen gadget or a golf shirt, or both. In spite of new federal rules designed to rein in various fees and limits, mall-wide gift cards often come with strings and conditions that aren't present in cards issued by individual stores, says Daniel Horne, a marketing professor for Providence College who tracks the gift-card industry. Monthly inactivity fees may kick in for cards from major mall chains -- which typically carry Visa or MasterCardMA-1.03% logos -- if they haven't been used for a year.

Tax Breaks: Cities and towns are working hard to attract major retailers and prop up flagging malls, often with generous tax breaks or subsidies. For instance, when it seemed likely that the local West Valley Mall would go out of business, city officials in Tracy, Calif., decided last year to pay the mall developer $2.4 million to help cover the costs of Macy's moving in, according to Tracy city manager Leon Churchill.

—Jonnelle Marte SmartMoney.com

How You Can Help Grads

Keep them on your insurance: A provision in the Obama administration's health-care reform legislation has made it possible to keep a child on your insurance plan until he or she is 26, regardless of student status. That may not be a huge savings, compared with buying insurance for a healthy 20-something on the open market, but workplace-sponsored plans are often more generous, have lower deductibles and don't charge significantly more for pre-existing conditions, says Craig Palosky, a spokesman for the Kaiser Family Foundation.

Fund a Roth IRA: Parents can take advantage of this year's extension of Bush-era tax cuts by contributing not just to their own Roth IRAs, but starting one for their children. Starting early can have a dramatic impact on a child's overall savings. A $5,000 IRA contribution could potentially grow to $75,000 in 40 years, assuming a 7% average return, according to T. Rowe Price.TROW-0.48%

Help build new credit: Since new legislation passed in 2010, college students have largely been off-limits to credit-card companies, unless they have a co-signer or evidence of income. As a result, many in the class of 2011 are graduating without a credit card in their own name and, therefore, no credit history. Rather than co-signing for a card, Greg McBride, senior financial analyst at Bankrate.com, recommends parents help new grads get a secured credit card, which requires a cash deposit to secure the line of credit. For example, someone who deposits $500 can charge up to that amount.

—Jilian Mincer SmartMoney.com

Sales are Everywhere

Retailers saddled with merchandise that didn't move are cutting prices this summer as consumers have trimmed spending on discretionary goods, particularly apparel, amid high prices at the gas pump and an overall sluggish economy. Sales are reminiscent of the 2008 holiday season when merchandise was marked down 50% to 80%. Also watch for flash sales, those that last only a few hours or days.

Kohl's, for example, is even taking a holiday-season promotions path to clear its shelves with early-bird and night-owl sales Friday and Saturday, in-store sales with 60% to 70% reductions across most categories and as much as 80% off on final clearance.

Express is shaving as much as 70% off summer shirts and shorts for men and women, with an extra 20% off already-reduced apparel. It seems few consumers bought anything full price at Gap, which is part of why its summer-sale price cuts are as much as 60%, with an additional 40% off some sale items.

Sears is taking 30% to 60% off everything from swimsuits to patio furniture. Home DepotHD0.49% is hacking 25% off select appliances as well as cutting prices on patio furniture, outdoor play sets and gardening gear.

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